Greece Cut to Junk at S&P as Contagion Spreads

Some more news updates on Greece.

Greece brings the value of euro down by being the first euro member to lose its investment grade. The article suggests the EU member-state leaders may have to hold an emergency summit after the Greek government’s decision last week to tap a 45 billion- euro ($60 billion) emergency-aid package failed to reassure investors. As of today, Greece’s bonds have been lowered to the point where they are at the same level as the bonds issues by Azerbaijan and Egypt.

A Crowd With Pity for Goldman

This is an addition to the previous article on Goldman. The article basically talks about how Goldman has become the sacrificial goat for all the wrongs that Wall street has committed. I particularly find it very interesting that people are so morally outraged that Goldman helped clients profit by placing bets that the housing bubble would burst. The bottom line for the company is not to be moral or just, its to make profit and they saw their chance to make a good profit and took it. I don't see how this is different from any other kind of speculation besides the fact that they made the right call when others did not.

World Bank gives more clout to a rising China

This article discusses how China's growing economy has resulted in lifting their voting power in the 186-nation lending organization. China is now above Western powers like Germany, France and Britain. Their voting stake rose from 2.78 percent to 4.42 percent. The U.S. stake remains the largest at 15.85 percent, effectively giving it veto power. Japan follows at 6.84 percent. China is doing very well and booming that the increase in their voting power also gives other nations with emerging economies more voice in how the bank operates and lends.

SNL Spoofs Obama

This is hilarious, but it also has some relevance to our class!

How long should we help the jobless?

This article discusses whether or not unemployment benefits should last longer than 99 weeks. The current period of 99 weeks is already the longest in history. But some unemployed workers are begging for more, saying they cannot find work in this economy. Unemployment checks have helped to keep food on the table and prevented more mortgages from defaulting. The checks also stimulate the economy because the unemployed tend to spend every penny they are given. However, it is a huge strain on the government to be sending millions of checks out each month. And some believe it lowers the incentives for the unemployed to find work. Lately, there have been promising signs in the employment market, like an increase in the amount of temporary workers. It seems as if most economists believe we should wait and see if this upswing will be permanent before we make any adjustments to the unemployment benefit period. This just reminded me about how difficult it is to remove government intervention once it has started. Although we studied it in relation to economies transitioning from socialism to capitalism, it can definitely happen in a market economy as well.

The Institute for Supply Management™ Manufacturing and Non-Manufacturing Report on Business

A sign that the economic recovery is expanding from the goods-based sectors to the service industries, the ISM non-manufacturing index reported its fourth consecutive increase, rising 2.4 points to 55.4 from February to March. The service sector, which has lagged the recovery reported in the manufacturing sectors, is now improving as the index has been above the expansionary threshold of 50.0 for the first three months of the year. The employment index continued rising to 49.8, just shy of growth, while new orders and business output continued expanding above the growth threshold. The export index resumed growth after three months of contraction, reaching its highest level since June 2007. These reports are another good sign that our economy is headed in the right direction and hopefully we can maintain these numbers.

March jobs report shows growth

The growth rate for jobs for March, in the United States, was higher than any other month in the last three years. This hopefully is proof that the economy is going to continue to get better in the coming months and years. Although the job growth rate increased the unemployment rate remained at 9.7% which is high. The article goes on to explain that some of the jobs, around 50 thousand, were because of the census being this year and their hiring of people. President Obama is using this as proof that the stimulus package is working and that job growth rates will continue to increase. We will have to wait and see if that is true but as of right now it is a good sign that the rate of growth for jobs has substantially increased.

G-20 Summit: 6 Countries in Recovery

This article is a broad overview of how the six largest G-20 economies are recovering since the global recession. Some are looking better than expected, while others are still struggling. China struggled less than the rest, boasting a 7.9% GDP increase, while U.S. GDP decreased by 1%. Inflation, GDP, unemployment, and interest rates are given for the US, China, Germany, Japan, France, and the UK.

Shareholders V. Stakeholders

The economic crisis has revived the old debate about whether firms should focus most on their shareholders, their customers or their workers. Over the past twenty-five years, maximizing returns to stockholders, has been the sole aim of firms. However, given the current financial crisis many have come to believe "shareholder value is the dumbest idea in the world." In many ways today Goldman Sachs epitomizes these economic complications. How will we choose to remedy these problems and what direction will we go in the future? Shareholders? Customers? Workers?

When the niños run out

Mexio's birth rate has been falling, once among the world's highest to now comparable to the U.S. Mecian woman had around seven children each in the 1960s and now the average is just over two. Contraception, more women receiving education and work opportunity, as well as more expensive housing has decreased the size of the Mexican family more. More Mexicans are aging as well and the country is not prepared with a health-care system or social security that will provide for the aging. The U.S. has historically absorbed half of each Mexican generation and with fewer of them, this could impact the U.S. reliability on migrant labor.

Rebounding Economy?

This article discusses the recent increase in spending within the United States. It appears as if Americans have begun to spend again, but the question remains if this is actual recovery or a fluke. Some economists have pointed to the stimulus package as the reason for this spending. They say that we will have to wait to see if people get new jobs before we can know how well the recovery is actually working. Also, the growth rate has been about half of what is expected directly after a recession. Still, some say it is true recovery. Only time will tell.

After a Coup, Niger Resumes Business as Usual With China

I thought this article was fascinating in the sense that it shows China acting as a true capitalist would. It has no qualms about its lack of morals in its dealings and it is clear that it is in it for the profit.

In the long run, this consistency in behavior could prove beneficial to the Chinese, as they have consistently showed their willingness to invest and make a long term commitment to Niger in a very important resource- oil. Thus if it works out for the Chinese, this could be one good investment for them.

Book on Samsung Divides Korea

An interesting article about a man from Korea who was accused of stealing as much as 10 trillion won, or $9 billion, from Samsung subsidiaries and stashed it in stock and bank accounts illegally opened in the names of executives. It gives an interesting look at how the judicial system in other countries works.

Book on Samsung Divides Korea

Life has been a roller coaster for Kim Yong-chul since he began talking about Samsung Electronics two and a half years ago. He has been celebrated by some as a whistle-blower, but in a culture that emphasizes workers’ loyalty to their employers, he has also been vilified as a traitor driven by personal grudges.

Parties Edge Closer on Financial Regulation Bill

A top Republican on the Senate banking panel said Sunday that a deal with Democrats appeared closer on a bill that would tighten regulation of the nation’s financial system. But he also said his party was prepared to block debate until the key planks of the legislation are in place.

For Greece, Restructuring Is No Longer Unthinkable

This is an article from a series of articles covering the ongoing crisis Greece has been in. Experts are now saying that not only can Greece restructure its debt and not default on paper but that they actually will be able to restructure. Total government debt was $365 billion at the end of 2009 which is 115% of GDP. The best way politicians feel Greece can restructure its debt is to allow to repay this debt over a multi-year period.

Perils Remain Despite Recovery’s Pace, I.M.F. Head Says

This article is how the head of the IMF stated that altough the economic recovery was faster than expected, there may be long term unemplyment and "unsustinable public debts." The IMF has increased its lending capacity sice the economic downturn on 2007. It has extended its loans to Latvia and Hungary and now Greece. The IMF has also renewed a pledge to "approve a redistribution of power that would lessen the emphasis on the wealthiest countries."

Graham Pulls Support for Major Senate Climate Bill

Republican Senator Lindsey Graham has been actively participating towards an energy bill with Democratic Senators John Kerry and Joseph I. Lieberman. The moment Graham heard of a possibility of adding on immigration measures before the energy bill, he opted out as a supporter. Graham believes that focusing on issues like illegal imigration would make it 'impossible to deal with the difficult issues involved in national energy and global warming poicy.' He feels that energy must be the priority.

Immigration advocacy groups to challenge Arizona law

This is an interesting article I came across this weekend. The governor of Arizona, Jane Brewer (R), on Friday signed into law a bill that requires police to question people about their immigration status including asking for identification if they suspect that someone is in the country illegally. This has sparked fears among legal immigrants and U.S. citizens that they will be hassled by police because they look Hispanic. Immigrants unable to provide documentation of legal presence could be arrested, jailed for as long as six months and fined $2,500. Legal immigrants will be required to carry paperwork proving their status. Currently, the law in Arizona and most other states does not require police to inquire about immigration status, and many police departments prohibit officers from asking out of fear of losing immigrants' cooperation in other investigations.

The governor also ordered the state's law enforcement licensing agency to develop a training course on how to implement the law without violating civil rights. The measure will take effect in July or August, depending on when the legislative session ends. The law also allows suits against government agencies that hinder enforcement of immigration laws and hire illegal immigrants.

The way up

Poor students are not getting matched up to the right college or are not completing college. President Obama hopes that America will have the world's largest proportion of college graduates by 2020. In order to achieve this goal, college will need to be made more affordable and high schools will need to help students apply to colleges worthy of them. Students are more likely to drop out if colleges are not challenging enough. Interestingly, the share of poor teenagers hoping to go to college tripled from 1980 to 2002.

Goldman Sachs Messages Show It Thrived as Economy Fell

Interesting view on how Goldman Sachs was ahead of the curve when the mortgage crisis happened. In late 2007 as the mortgage crisis gained momentum and many banks were suffering losses, Goldman Sachs executives traded e-mail messages saying that they were making “some serious money” betting against the housing markets.

Obama to Wall St.: ‘Join Us, Instead of Fighting Us’

Good article about the role of government in the economy. As President Obama pushes for more regulation on banks and more government involvement.

How Big Is The Marijuana Market?

This special report from CNBC analyzes the marijuana market through a simple demand and supply model. The demand is estimated to be in the range of $10-40 billion a year measured through the average grams of marijuana in a joint (price ranging from $5-$20 per gram). Supply side was measured based on total kilograms of marijuana seized during the past year and this estimation falls in the range of $15-$17 billion. Overall, the model estimates a $40 billion marijuana market. Tax revenue on tobacco lies in the range of $17 billion and marijuana legalization would produce a similar tax revenue in the range of $16 to $20 billion. Although there are many other facts to consider when entering the debate to legalize marijuana, the numbers are very optimistic in showing comparable tax revenues to tobacco and the economists interviewed believe this number could be higher because of the difficulty in measuring marijuana demand.

Spirit of Reagan, Thatcher Doomed: HSBC Economist

In the link, Stephen King, Chief Economist at HSBC, proposes that the extreme growth and expansion in China and India have slowed down the continuous improvement in standard in living. This being said, the US government and the European governments have now relied upon on big government and this is now the norm. King says that the financial markets will depend more and more on government regulations and politicians. He finishes by saying that market forces are being manipulated outside of markets control and will continue to do so.

Chrysler Lost $4 Billion but Sees Signs of Improvement

Chrysler announced that it lost $4 billion since bankruptcy protection nearly a year ago. At the same time it reported positive cash flow and a small operating profit in the first quarter this year. This is the first reports seen since Fiat has taken over. Chrysler is on track for meeting its 2010 goal of a "break-even-or-better performance." Fiat sales grew slightly while they reported first quarter loss of $34 million, which is much less than last years first quarter loss. Chrysler has been "improving trading margins, operational efficiencies and rigorous cost discipline," in order to cut costs.

Paulson Aims to Reassure Investors

John Paulson hasn't been accused of any wrongdoing. But the hedge-fund billionaire has gone on the offensive to reassure investors that his huge firm will emerge unscathed from a case that has drawn him into a political and legal vortex.

The steps, including a conference call with about 100 investors late Monday, come amid indications from some clients that they might withdraw money from his firm after a lawsuit brought by the government against Goldman Sachs Group Inc. related to an investment created at his firm's request.

Banking Shares Lift Wall Street

Goldman Sachs experienced a 91% increase in profits in the first quarter, which exceeded expectations. However, they are being accused of fraud which caused a decrease in shares by 13% as of Friday. On the bright side, this helped bring optimism to consumers about big banks. Also, bank stocks increased, for example, Citigroup increase by 1.8%, Bank of America increased by 1.2%, and JP Morgan Chase increased by 1.1%. The price of oil rose by $2 which caused an increase in shares of oil producers as well. Investors are trying to push the rally to a 14 month but they will need more than just strong earning to do so .

Yahoo profits triple!

Yahoo's first-quarter earnings nearly tripled as the Internet company's revenue edged up for the first time in more than a year.

Goldman Sachs's Soaring

Goldman Sachs Group Inc. may be facing complications from the political and legal storm over its business practices, but the Wall Street bank's first-quarter financial results continued a pattern of trouncing even optimistic expectations.

IMF: Mounting debt threatens global recovery

The IMF (International Monetary Fund) stated on Tuesday that the historic levels of government debt in the developed countries can cause another global financial crisis.According to the article, the accumulated levels of debtare debts that have not been seen since World WarII. The IMF's latest Global Financial Stability Report was released Tuesday morning and the report said that in many ways the financial system had stabilized, and that some aspects of the recent crisis had proved less severe than initially thought. Currently the most acute government debt problems are in Greece, whose government is negotiating a rescue plan with the IMF and other European nations but has already had to cut social benefits and raise taxes.

Deal Is Set to Reopen Air Travel in Europe

For the past week, air travel to, from, and around Europe has been shut down, due to the ash cloud from an erupting volcano in Iceland. The European governments have shut down airspace for fear that flying in or near the cloud could damage the planes to the point that they would be inoperable in the sky. This shut down has caused hundreds of millions of dollars in losses for the airline companies and left thousands of people stranded around the world. The threat of the cloud has also reached North America as airports in Newfoundland have begun to be shut down. Many airline companies have flown test flights to demonstrate that the government acted too drastically without proper analysis of the situation.

This article questions what is the proper role of the government in a capitalist economy. The government has a role in protecting its citizens from dangerous situations. That is why many industries are regulated. The government is trying to protect the consumers. This seems to be a case where governments have gone too far. They were acting in what they thought were the best interests of consumers, but it has gotten to the point where the consumers and the industries are both being hurt. The governments should have begun immediately testing if travel was safe and if the grounding of flight has to be continued. They should have also looked at its effect on the airline industry, which is already struggling to make money.

Australia Competition Watchdog Blocks AXA Deal

Australia blocked its $12.2 billion bid for the Asia Pacific operations of the French insurance AXA. Since the National Australia Bank declined the offer, the Australian asset management company AMP may step in. The fight over the AXA Asian Pacific is seen as a "promising growth market for wealth and savings management and insurance services." Overall Australia has shown to have a strong financial sector that has clearly persevered through the financial crisis that many countries have been struggling through.

As far as a merge between N.A.B. AND AXA goes, the Australian Competition and Consumer Commission finds it to be a poor decision. The combining of the two would hurt competition.

Unemployment rises in 24 states

Even though my last post, stated an improvement in the unemployment rate, 11 states recorded jobless rates above the national average and 24 states that posted rates below the national figure in March.

Many. The Labor Department concluded that the nation gained 162,000 jobs in March but the unemployment rate has been at a steady rate if 9.7%. However, economists and policymakers expect the nationwide jobless rate to remain elevated for a good time even though job growth is slowly rising.

Still Tottering

The government may pretend otherwise, but Italy's economy has deep structural problems that undermine much chance of growth. But with much of the worlds attention squarely fixed on Greece and their remarkable economic troubles, Italy has been able to fly under the radar. Although it should be noted that Italy has the EU's second highest public debt, second only to Greece. However, more importantly is the fact that Italy's rising debt has caused unbelievable amounts of strain on the countries economic stability. It is clear that Italy must increase its GDP and cut back on spending, yet, vested political interests have not allowed this to occur. Is Italy leaning towards potential troubles or simple in need of some minor adjustments?

The World Turned Upside Down

The emerging world, long a source of cheap labour, now rivals the rich countries for business innovation. Despite frequent reports of exploitation and mistreatment, developing countries are quickly becoming "hotbeds" of business innovation. They have begun implementing new systems of production, distribution, and even experimenting with new business models. Developing nations amazing ability to adapt and continually innovate has allowed emerging markets to thrive. Perhaps globalization is beginning to move in an entirely new direction. Until now it had been widely assumed that globalization was driven by the West and imposed on the rest. Now with the emerging world quickly gaining on the world powers, maybe its time that we starting learning from our rivals...

World Bank approves loan for coal-fired power plant in South Africa

A loan ($3 million) for South Africa's coal-fired power was approved by the World Bank on April 8. As a result of environmental and other concerns about the project, countries like the United States, the Netherlands and Britain decided not to support this loan and plant.
The major reason for this power plant is to help reduce and ease the chronic power shortages in South Africa. It is for this reason that the World Bank approved the loan so that the people in South Africa can get reliable electricity supply which can in turn increase the economic growth.
Although this project is for a good cause, the U.S and the other countries are concerned about how this will greatly affect the environment (carbon-emissions). Their concerns don't seem to be compatible to that of the World's Bank; therefore they decided to abstain from the project.

Bank of America Reports 25% Profit Drop

Because of lower-mortgage banking activity and credit-related gains, Bank of America has experienced a 25% drop in profits last Friday. Revenue, however, still turned out to be larger than expected despite the drop. The article says it is a significant improvement for the Bank of America considering in 2008-2009, it was one of the largest recipients of government support, and barely made it to pay off the taxpayers in recent months.

Greece Says No New Austerity Measures Demanded

Greece plans on finalizing a €45 billion loan package. Athens, along with Greek finance minister
George Papaconstantinou, believes there is no need to apply tougher austerity measures to compensate for the funds.

Greece's current financial problem involves failing to control its deficit, which was further amplified by investors that allowed borrowing costs to increase. Last September the deficit was at 12.7 percent of G.D.P. This is four times the euro-zone limit suggested at 3 percent G.D.P.

Athens intends to reduce the deficit by four percentage points this year. Funds that Greece are requesting may leave other European lawmakers in opposition. Germany for example, wonders if subsidies Greece receives would encourage other European Unions, that are economically weak, to ask for similar aid.

Islamic finance

An interesting read about sukuk, a type of Islamic finance.

The article is not long but it talks about problems such as enforcement as any asset is in the jurisdiction of the shariah law and anything seen as not falling within the lines of the law would be considered invalid. Trouble is that there is no single, universal body of law that stipulates and decides what is the standards and as such enforcement is seen as somewhat arbitrary.

SEC accuses Goldman Sachs of defrauding investors

I just can't well up enough sympathy to feel bad for these guys...something about how they destroyed the country's finances in the span of a couple of days seems to make me downright giddy that they're getting their feet to the fire.